Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Tuesday, October 30, 2012

VIX Nasdaq & Bonds

Stock Market Technical Analysis Blog

Click on image to enlarge

In this evening's blog I would like to add a third component to Sunday night's blog, that being the bonds chart.  In the cluster above I have the VIX (Volatility Index) at the top, Nasdaq ($COMPQ) in the middle, and TLT (bonds ETF) at bottom.

It is just this simple: when the VIX goes up, the Nasdaq goes down, and bonds go up.  In all three of the weekly bars charts above I have applied the SMV®  Sentiment EMAs.  

Every financial adviser you speak with will tell you it is impossible to time the market and you will hear the same spiel from the financial media but it is just simply not true.  Looking at all three 6-year charts above I have drawn vertical lines at each of the fifteen times the Sentiment EMAs have intersected.  After each intersection or merge happens, if the red EMA rises above the green, the direction in that symbol is to the upside.  If the red goes below the green, the direction is to the downside for that symbol.  

The system is to buy or sell the particular symbol based upon the direction the red starts after the merge of the two begins to separate and then exit the trade when either it has become overly extended in the direction it is  going and/or it reaches the major channel line in the direction.  Notice that each time there was a green buy signal on the Nasdaq there was a sell signal on the bonds and the VIX also went down.    Each time there was a buy signal in the bonds, the Nasdaq went down and the VIX went up.  These three work in synchronization nearly 100% of the time.  In times of erratic market behavior or heavy market manipulation you can still correctly evaluate the market direction by taking into context the position of the two ema lines in all three symbols together.

For the past six years, the SMV® Sentiment EMAs have been 15 out of 15 for showing when to go into stocks and when to go into bonds.  


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